He said that economists should not prescribe for the economy as a whole. Governments should decide what they want the economy to do and then economists would tell them how best to do it.

Governments might decide to give high priority to full employment. Economists would tell them how best to do this while keeping any adverse effects to a minimum.

Governments might decide to regularly accept considerable numbers of refugees who have few skills, not even the local language. They might ask economists how best to provide work for them - obviously a solely high-tech, high-skill economy would not.

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Governments might decide that they want a local car industry. The federal government's present economic adviser, the Productivity Commission, has just declared that the economy will grow more rapidly without a car industry. To this a government might reply: even if that is true we have strong reasons for keeping a car industry. We don't mind a slower-growing economy.

The Productivity Commission was asked to be a humble adviser about the car industry. It was asked to identify and evaluate possible alternative public support mechanisms for the industry so that it could be set up for the long term. This part of its instructions it has brazenly ignored. Having decided that the overall economy would be better off without the car industry, it saw no need to bother with support in any form.

The commission was also asked to report on the support the car industry receives in other countries. Nearly all countries that have a car industry support it in one way or another. The commission reported that these methods are so various and so secretive that it could not estimate their extent. Nothing more is said on the topic. Of course Australia is to be quite open and transparent on this issue by not supporting the car industry at all!

The commission did not reconsider its position in the light of the fact that other countries support their car industries. It regards this support as evidence that the overseas competition in this market is too strong.

In its interim report on the car industry in December it noted that while Thailand can export cars freely into Australia, Thailand imposes an excise that handicaps Australian sale of cars to Thailand. Anyone but an economist working for the Productivity Commission would surely recommend that Australia should put tariffs on Thai cars until it drops the excise on ours. But no; this again is evidence that the game is too hard. It's not wrong for Thailand to protect its industry; protection is bad only if we do it.

The car industry and its supporters have made a strong case for retaining the car industry because of all the spin-off effects that flow from it. It is a central industry to manufacturing in the skills it nourishes and the other industries it supports. The commission considers these arguments ''weak''. For what industry could a strong case for spinoff effects be made? In the commission's world: none. In its eyes all attempts to protect an industry are a ''distortion'' to the overall economy. So the detail of its report is worthless. Its answer has been predetermined.

It would be a great gain to the overall productivity of the economy if the Productivity Commission issued a final, one-paragraph report to the effect that all protection, subsidy, concession and encouragement to industry is counter-productive. And then resigned. Why are we paying for a body that always gives the same answers?

Of course the Productivity Commission is rightly worried that giving subsidies lessens the incentive to be efficient, innovative, and to develop new products. Part of its job was to make recommendations to avoid this. But we are not discussing support to the coach-building industry. Cars are and look like remaining a regular means of transport for most of us. And factories that make cars can be readily turned into factories that make other things. It never crosses the mind of the Productivity Commission that there might be an occasion when we need car factories to turn out military vehicles.

The free-trade world of which Australia is the most enthusiastic supporter may bring in the thousand years of peace. But it may not. We are no longer to make cars, soon we will not service planes, we will lose our national airline, we are not to refine petrol. The dangers to which this exposes us are beyond the computations of the Productivity Commission. Australia is more than an economy. The government needs to find new advisers who understand this.

John Hirst is a historian and commentator. His most recent book is The Shortest History of Europe.